November 19, 2018

United States-China Resume Trade Talks

Earlier this month, President Donald Trump confirmed that he plans to meet with Chinese President Xi Jinping on the sidelines of the upcoming G-20 meeting, hosting Xi for a dinner and a meeting on Dec. 1 that could cover trade matters. Since then, and since a Nov. 1 call between Trump and Xi, the officials from the two countries have resumed contact, with U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He and their working-level counterparts holding several recent discussions on trade.

While President Trump has offered some optimistic rhetoric about a potential deal with China to end recently-instituted and currently-considered tariffs, rhetoric from his key trade advisers has been mixed and, sometimes, contradictory.

While in Asia this month, Vice President Mike Pence reiterated U.S. demands that China comprehensively offer solutions to the full array of U.S. concerns, including intellectual property, technology transfer, industrial policy, and state-owned enterprises, before the two sides even can begin trade negotiations. Commerce Secretary Wilbur Ross said last week that the meeting between Trump and Xi is more likely to result in a “framework” instead of a full-blown trade deal. Additionally, an unnamed senior U.S. official speaking with Reuters downplayed the possibility of a breakthrough with China.

Contradictory statements made over the last week by National Trade Council Director Peter Navarro and National Economic Adviser Larry Kudlow also raised questions about which tack the United States may take headed into the Trump-Xi meeting. As Politico reported, Navarro said there would be a “stench” around any deal with the Chinese government that involves the influence of Wall Street players while chief economic adviser Larry Kudlow said the president “can talk to whomever he can talk to,” including people on Wall Street, about a potential trade deal. Kudlow also noted “we’re having communications at all levels of U.S. and Chinese government.”

While the two sides continue to talk, the Office of the U.S. Trade Representative (USTR) has continued to handle exclusion requests for products covered under List 1 ($34 billion) and List 2 ($16 billion) tariffs and U.S. Trade Representative Robert Lighthizer has denied reports that the administration has put future tariffs on hold. The List 1 exclusion process formally closed on Oct. 9, with the List 2 exclusion process still open until Dec. 18. Tracking from the USTR shows that it has received 11,262 exclusion applications for those two lists, with none of those applications granted as of yesterday.

Meanwhile, Canadian and Chinese officials are in the beginnings of negotiations on a potential trade pact between their two nations.